Asos sales soar 24% to nearly £2bn during latest lockdowns

Online fashion giant Asos has revealed that sales soared during the latest Covid-19 lockdown as high street stores remained closed.

Asos has provided an update for the City

Revenues at the retailer jumped 24% to £1.98 billion in the six months to the end of February, with pre-tax profits up 253% to £106.4 million.

The business said it benefited particularly from strong UK sales during the period – which covered the second English lockdown in November, the subsequent tiering and eventual third lockdown.

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High street fashion rivals have been unable to open their doors throughout 2021 so far, but will be allowed to welcome back customers from next Monday.

In the UK, Asos sales were up 39% to £800.4 million, compared with 18% in the EU, 16% in the US and 16% in the rest of the world.

It said: “Overall we saw a net Covid-19 tailwind of £48.5 million – a benefit which we expect to reverse once we see restrictions lifted on the hospitality and tourism sectors.”

The integration of the Topshop brands, which Asos bought out of administration earlier this year, is also progressing to plan, the company said.

And it has remained flexible in responding to demands for “lockdown” products, as sales of formal and outfits for social events remained low.

Instead, shoppers turned to “activewear” and “casualwear” categories.

Profit margins fell during the period, however, by 200 basis points – or 2% – due to increased freight and duty costs, alongside foreign exchange rate movements going against the company.

Bosses said they hope to be in a strong position, ready to capitalise on “event-led” products, when social restrictions ease.

The company said: “We believe the shift to online retail as a result of the pandemic and the accelerating consolidation of offline retail has increased consumer confidence in shopping online.

“In the coming months we expect a portion of consumer demand will move back to stores as restrictions are eased throughout our markets, but we expect online penetration to remain structurally higher than pre Covid-19 levels.”

Richard Hunter, Head of Markets at interactive investor, commented: “There may be challenges to come, but for the moment ASOS is firing on all cylinders as pandemic lockdowns largely play to its strengths.

"The company has managed to retain its young and trendy following and, following a partial return to the workplace and the renewed ability to socialise, ASOS could well benefit from many a refreshed wardrobe.

"The addition of the Topshop brands are seen as both complementary to its existing offerings as well as providing another route to its youthful audience, and the initial signs of the integration are promising.

"Although the pandemic has resulted in a net tailwind of £48.5 million, this is expected to reverse and so will shave some margin growth. At the same time, the company has highlighted that the economic prospects for its core “20-somethings” market are unclear once life returns to some kind of normality and unemployment potentially spikes as the various government aid schemes are withdrawn.

"At the same time, competition remains famously fierce and fickle in the sector, with the likes of boohoo in hot pursuit. The pandemic has also shifted the trend from the group’s strong “occasion wear” offering to the likes of casual wear and active wear, resulting in a need to constantly display the “sale” sticker . Covid-19 has also been partially responsible for putting some pressure on gross margins due to increased freight costs, although despite a decline of 2% the level remains at a very comfortable 45%.

"Even so, ASOS has continued its stellar growth, as evidenced by its current size. The company has chosen to maintain its roots within AIM, even though its market capitalisation of £5.8 billion would be sufficient to warrant a place in the FTSE100 if it so desired.

"Prospects for the company are clearly on the boil as far as investors are concerned, where despite the strength of the share price the market consensus remains at a buy.”